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Automatic textbook billing

An offer students can’t refuse?

A Report by U.S. PIRG Education Fund
Written by Kaitlyn Vitez, U.S. PIRG Education FundDOWNLOAD THE REPORT

Attending college in America is one of the largest expenses someone will have in their lifetime. For more than 30 years, textbook publishers have added to that financial burden by driving up textbook costs through a variety of tactics. The latest effort is to automatically charge students for textbooks on their tuition bill.

U.S. PIRG Education Fund undertook a first of its kind review of these contracts covering 31 colleges across the country, and affecting more than 700,000 undergraduate students. We found that many of these contracts fail to deliver real savings for students, reduce faculty and student choice, and give even more power to a handful of big publishing companies.

In addition to reviewing legal contracts signed by the institution and the course materials provider, we analyzed how implementation of automatic billing programs failed to provide students or faculty a chance for input, prevented students from opting out, or otherwise failed to deliver affordable educational resources.

A broken market drives up prices

Three companies — Pearson, Cengage, and McGraw-Hill — control 80 percent of the college textbook market. These publishers have historically driven up prices by issuing new editions with limited changes and taking advantage of a captive market of students who cannot choose an alternative to the assigned textbook. The result is clear: the rapidly increasing cost of textbooks has students now spending over $3 billion of financial aid dollars each year on course materials.

In the internet age, students have found new ways to work around high textbook costs. The past decade has seen the creation of a thriving online marketplace that facilitates trading, renting and selling of books. And a growing movement of openly licensed textbooks that are free or can be printed at low cost are creating real competition for traditional publishers — and saving students hundreds of millions.

Requiring students to purchase access codes to a proprietary publisher platform to submit homework or other course materials is crucial for publishers to stay relevant in this shifting marketplace. These codes lock students into high cost textbooks without significantly increasing educational value. Instead, students continue to struggle to afford critical educational material and often lose access to the materials at a later date. This is a continuation of the broken textbook market, not a radical solution. Rather than making changes that are more consumer-friendly, access codes are a last-ditch attempt from the publishing industry to maintain — and even strengthen — their monopoly

To increase use of access codes, publishers have sought out partnerships with institutions to steer faculty into these products and automatically bill students for these materials. Variously known as inclusive access, innovative pricing, or other names specific to the publisher, contracts between publishers and institutions set in place the conditions and discounts under which students are automatically charged on their tuition bill via an opt-out fee for each assigned class material.

Under federal law, these materials must be sold to students below market price if they are to be automatically billed, and students must be able to opt out of such charges. However, are these programs worth the trade-offs on transparency and choice to students, faculty, and institutions? Are discounts significant? Do they last? Do students have real decision making power in opting out? What other conditions exist?

The solution is simple

Rather than using automatic billing in college classrooms, colleges should switch to options that preserve faculty and institutional control, and enhance student choice. We urge campus leaders to say no to automatic billing proposals on their campus, and if one is already in place, fight for these changes to improve student and faculty choice:

• Have a clearly marked pricing structure publically available that shows the original price of the assigned material, the discount off the national list price, and multiple format options.

• Reject attempts to restrict marketing materials that can be issued by the institution to educate students on their course materials purchasing options.

• Eliminate quotas. The discounts alone ought to be enough to get students to participate at a high enough level to make a program worthwhile.

• Cap annual price increases to no more than the rate of inflation, which is currently at 2.3 percent annually.

• End any restrictions on the number of students who can obtain print copies.

• Have the billing mechanism be opt-in and listed as one of many methods of payment alongside credit cards, cash, etc. that students can use at the bookstore.There is nothing wrong with institutions seeking to negotiate bulk discounts for students, but students should be able to choose whether to take advantage of it and how they pay.

Automatic billing deals look different at every college — but there are troubling trends we've found across the documents framing up these agreements. Check out the repository of open records requests to look at the contracts that informed our report, and see what automatic billing looks like at your college's peer institutions.

U.S. PIRG Education Fund is part of The Public Interest Network, which operates and supports organizations committed to a shared vision of a better world and a strategic approach to getting things done.